In the article ‘Toughest on the poor: America’s flawed tariff system’ Gresser debates America’s trade policies. He pours scorn on America’s selective and discriminatory tariff structure. He berates the dual composition of tariffs in the United States where luxury goods are lightly taxed whereas low-technology, light manufactured and cheap goods are exorbitantly taxed. Overall, the US tariff rate is at a historic low to something like 1.6% but for low-tech consumer goods the average tariff rate is 10.5 %. On other imports it is 0.8 %. Tariffs on industrial imports and expensive consumer goods like cars, televisions and appliances are quite low.
He believes the tariff structure is iniquitous and regressive. He shows that America’s tariffs on necessities like clothes and shoes far exceed those on expensive goods. He lucidly demonstrates that America’s unjust policies on tariffs inflict more hardship on those at the lower rung of the economic spectrum than on upper middle class and wealthy families. He explains that poor and single parent families who barely make enough to make ends meet, like $25,000 a year, end up spending a larger part of their sparse incomes on high tariffed foreign goods like sneakers, underwear, t-shirts, knitted synthetic and cotton shirts, drinking glasses and plates than do rich families on these goods, and luxuries like silk shirts and gold-plated cutlery and crockery.
Tariffs on the cheapest goods are higher than those on overall consumer goods. Tariffs on synthetic and cotton shirts are 32.5 % and 20 % respectively while those on silk shirts are only1.9 %. Tariffs on the following products are: 8.7 % for cutlery and tableware, 13.8 % for suitcases and handbags, 10 % for bicycles and 11.4 % for shoes and clothes. Most tariff revenue comes from a very small number of goods. Shoes and clothes together make up 7 % of imports but bring in nearly half of all tariff revenue.
The principal reason for the disparity in tariff rates is that in the past manufacturers of chemicals, semiconductors and capital goods have been proponents of free trade to the point of willing to give up domestic tariffs in return for removal of foreign trade barriers. In contrast industries like shoes, textiles, cutlery and glassware were scared of low-cost labor and foreign competition and thus wanted high tariff barriers.
The rationale given for high tariffs on cheap consumer goods is to preserve jobs in light manufacturing. The author attacks the rationale and proves that the ostensible reason given for high tariffs namely preserving jobs rests on shaky ground. The purported reason for high tariffs in these industries is hollow, as employment in these high tariff industries accounts for about only 3 % of manufacturing jobs in U.S. Employment has fallen by half in these high-tariff industries. The number of workers making children’s clothes has dropped from 44,000 to 7,000. Therefore it is apparent that the job protection argument is untenable.
The author shows that America’s tariff system harms poor countries like Bangladesh, Nepal, Mongolia and Cambodia much more than Germany, France, Ireland, Singapore and other advanced countries. He says that average tariffs on European exports like cars, power equipment, computers and chemicals is about 1 %. In stark contrast poor countries face tariffs that are 15 times higher than those imposed on rich countries by America. Nepal faces tariffs 60 times higher than Ireland. He cites figures showing that America collects more in tariff revenue from Bangladesh than from France although the value of its trade with France is 15 times higher than that of Bangladesh.
The author finally says that even Europe’s tariff structure is equally bad. However, he correctly notes that that is not an excuse for America adopting a diabolical tariff system. He says that America has made some improvements as evidenced by the Clinton administration’s African Growth and Opportunity Act, which has propelled African exports. Despite this there is much more room for improvement. He has calculated that eliminating trade barriers on cheap consumer goods would mean a net gain worldwide of 35,000 jobs. He believes that the prevailing tariff system is immoral and should be rectified. He concludes by saying that the United States of America should spearhead a worldwide effort of zero tariffs on clothes, shoes and consumer goods. This will provide immense benefits to the poor people in America and also boost economic growth and development in poor countries.